Wednesday 22 August 2012 Wednesday 22 August 2012
Eurocrash: financial repression
In the meantime, the paper has stolen a march on the competition with an exclusive interview of Samaras. In this he makes very clear his belief that leaving the euro would be "a disaster".
It would mean, says the Greek prime minister, at least another five years of recession and unemployment in excess of 40 percent, a nightmare of economic collapse, social unrest and an unprecedented crisis of democracy.
Greek living standards have declined over the last three years by approximately 35 percent, he says. A return to the drachma would immediately lower it by at least another 70 percent. Samaris asks: what democracy could survive that? In the end, it would be like the Weimar Republic.
Greece is, of course, after more time to repay its debts, and will argue that it has an escape clause in its bailout agreement, which allows it to vary the repayment schedule if the recession is deeper than expected. And the recession has been deeper than expected. This, incidentally, is spelt out in detail in Süddeutsche Zeitung. A single sentence could be the way out, it says.
But anyone expecting any more than theatre is going to be disappointed. The hard men representing the troika of the EU commission, the ECB and IMF are currently examining the Greek austerity measures. Their full report is not going to be ready until September, and no decisions are going to be made until copies comes off the printers and the text has been digested.
Unsurprisingly, therefore, Die Welt is bypassing the Greek drama and picking up a WSJ article which is focusing on the politicians of the eurozone. These are accused of appropriating finances at the expense of savers. Low interest rates and no compensation for inflation amount to "financial repression".
And this could very well be the way the Greeks are feeling. Bild has taken soundings on the streets of Athens. "The crisis is eating slowly into our souls", says Mikaela Tsibragou, a 25-year-old clerk. He was not referring to the politicians. It is doubtful whether they have them.
COMMENT THREAD
Richard North 22/08/2012 Eurocrash: volume of comment continues
Even then, they tend to show little understanding of their own specialities, evidenced by the frequent over-interpretation of short-term market movements, commentators often suggesting that they have deeper meanings than is actually the case.
Such has been the reporting of the rise in global stocks, and the rise in the value of the euro against the dollar yesterday – widely interpreted by the media as a response to the expectation that the ECB will soon start buying Spanish and Italian bonds.
There may, perhaps, be some traders who actually believe this, but it should be borne in mind that the bulk of trades are now computer processed, without direct human intervention. In light summer trading, they can drive the market, making any attempt to analyse sentiment meaningless.
The market is, of course, a machine for making profit, so it is fruitless trying to use these short-term fluctuations as a source of political intelligence. Only a certain gullibility and a propensity to encourage delusional behaviour can draw conclusions from much of the data.
For a more considered view of the longer term prospects for the euro, one might refer to an analysiscarried out by Commerzbank, which has concluded that the euro is set to weaken.
A recent article in Der Spiegel also had investors preparing for a euro-collapse, and a good indication of market sentiment is can be found in the lead item in Die Welt. It is telling us that speculators are betting on a comeback of the Deutschmark.
This is the interpretation of the willingness of investors buy German bonds, even though for some time there has been virtually no yield, and most recently some bonds have negative yields: you have to pay the German government to lend it money.
The explanation for this is that investors expect to be compensated by massive foreign exchange gains when the euro falls apart. With the value of holdings in Deutschmarks appreciating, other denominations can be bought for a song – and of course, assets valued in those currencies. Difficulties in exporting could thus be offset by the ability to acquire cheap foreign assets.
Perhaps this is why, yet again, we are hearing talk of a "Marshall Plan" for Greece, the like of which was being discussed in February last. Essentially, what we will be seeing is Germany buying out Greece's interest in the euro. A figure of €90 billion has been mentioned – a small amount compared with the potential €1 trillion that Germany might otherwise have to bear, and the potential for profit.
All the German government has to do, says Handelsblatt, is communicate very clearly that they will refuse of further aid to Greece - which would in fact lead to the resignation of Athens from the euro zone - not to pursue a strategy of renationalisation of Europe but to save the euro and again make Europe credible.
With this, and after the relative silence of the international media, we are almost reaching saturation point for analytical pieces. Even le Figaro is doing the honours, and discussing the prospects for the euro. Throughout Europe, and also in Germany, it says, there is: "An implicit confirmation that Europe is preparing a backup plan in case of a Greek exit from the euro".
The Italians are also pitching in, with comment, the Corriere della Sera rejoicing in the news that the ratings agency Moody's thinks that the crisis will be over in Italy by 2013.
Countries such as Greece and Ireland may take until 2016 to complete their program of fiscal consolidation, says the agency. But Italy, Spain and Portugal may be able to get out of the state of affairs by 2013 if they are able to apply fully the reforms adopted so far.
The Italian press is specially interesting, as both la Republica and la Stampa contradict Ambrose's assertion that Germany has bought the ECB's bond purchase package. La Stampa actually says that both "Berlin and the Bundesbank" oppose the ECB.
Incidentally, we learn that the Failygraph offered two version of the headlines for Ambrose's piece. On the web, it was: "Germany backs Draghi bond plan against Bundesbank", but in the print edition it became: "Germany's man at the ECB backs bond plan". If it is any help, Faz headlined: "ECB and Bundesbank drift apart".
However, Lüder Gerken, chairman of the Freiburg Centre for European Policy, is perhaps the most forthright about the ECB. The plan is no way out of the debt crisis, he says. It can't solve the problems that led to the euro-crisis, or solve the balance of payments crisis. The ECB is now trapped in a dead end, he adds.
It is getting to the state now, where all the positions have been stated, and although the volume of comment is not abating, additional commentators such as Martin Walser – who sees the break-up of the euro as a "nightmare scenario" – have very little new to offer.
Effectively, we are back where we were with the Booker piece, with Handelsblatt telling us: "Greece is at the mercy of German politics", then writing of the "hot autumn" of the euro-rescuer.
What we really need says Frank Schäffler are rules for withdrawal and expulsion. A lot of people would agree with him. Had they been in place by now, Greece would be selling package holidays in drachmas.
COMMENT THREAD
Richard North 22/08/2012
Wednesday, 22 August 2012
"Merkel wants to do the right thing, but just does not know how", is a little gem I missed from my review last night. It was buried in one of the many pieces in Handeslblatt. While the British papers might do one grudging article on the euro, this paper is doing four or five a day, plus comment and feature articles.
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